When in Rome, Do as the Romans Do?:Similarities and Dissimilarities in the Forms and the Practices between Subsidiaries and Headquarters of Multinational Enterprises

In the international business literature, classical studies posited a strong power asymmetry between the headquarters (HQs) and their subsidiaries, where the HQs are in charge of major decision making processes. A few recent studies in the field have suggested that subsidiaries also have much to say in the decision making process regarding the choice of the organizational forms and the practices in the host countries. Building on the strategic management perspectives and institutional theory, I develop a few propositions to explain the power relations between HQ and subsidiary, in deciding the extent to which MNEs’subsidiaries resemble local firms in the host country versus the extent to which they resemble the parent companies (i.e., HQ) in terms of their forms and practices. It is argued that strategic factors such as generic business level strategies and international corporate level strategies of the MNE, and institutional factors such as legal pressures, decide the levels of the similarities and dissimilarities in the forms and practices among the HQs, the subsidiaries of multinational corporations, and the local companies.